How to protect yourself financially from the impact of the coronavirus
The current Coronavirus outbreak will fundamentally change the way we will be living our lives for the foreseeable future.
In addition to having to deal with the increasing number of reported Coronavirus cases, communities across the country are being impacted by the temporary closure of businesses, schools and other public facilities.
Whilst these steps are necessary to help contain the spread of the virus and to protect our NHS staff, they may bring uncertainty for many people who are still worried about losing their jobs, not being able to maintain their mortgage repayments and how they will make ends meet.
This guide will address how your finances could be affected and the steps that you can take right now to help protect you and your family financially in both the short and long term.
As the current situation changes quickly and frequently, the information contained in the guide is subject to change.
Employment, sick pay and benefits
If your employer tells you not to come into work or reduces your working hours because of coronavirus there are several support measures in place.
A new fund has been set up by the Government to help employers to keep paying their employees if they are unable to work due to the business struggling as a result of the Coronavirus.
This fund will provide the cover of up to 80% of salaries up to a maximum of £2,500 per month and is available to anyone on the PAYE scheme.
Under the scheme, wages will be backdated until 1st March 2020 with payment expected to commence before the end of April.
Statutory Sick Pay (SSP)
If you have the Coronavirus or if you have had to self-isolate, you will be entitled to claim SSP.
Temporarily, SSP will be paid from day one for people who have caught the virus rather than from day 4 which is currently the case.
If you’re employed but your earnings are too low to claim SSP, you may be able to claim Universal Credit.
An increase of £1,000 for the next twelve months will apply to both the Universal basic allowance and Working Tax Credits.
If you are self-employed
Self-employed people will be able to apply for a grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month.
The scheme is open to those who earn under £50,000 a year.
The money, backdated to March, will be paid as a lump sum directly into people’s bank accounts from HMRC.
The payments, which will be available in June, will be taxable.
If due to the Coronavirus you are unable to work and if you have made adequate National Insurance Contributions, you may be able to claim the new Employment and Support Allowance or make a claim under Universal Credits.
If you claim Universal Credit, the minimum income floor will be temporarily abolished.
In addition to the Government announcing grants and business rates support banks will be offering loans to small and medium-sized businesses.
Mortgage and rent payments
You may find your mortgage or rent payments hard to cover if you’re faced with a sudden drop in income.
If you have a mortgage
If you think that you will struggle with mortgage repayments because of the Coronavirus you can apply for a mortgage repayment holiday. This is a short-term measure that allows you to take a break from making your contractual monthly mortgage payment for up to three months.
During the repayment holiday, you will not have to pay anything, but your mortgage balance will increase as the interest be added to the total amount you owe.
Repayment holidays are only available to homeowners who are not in arrears with their mortgage repayments.
If you have already fallen behind with your payments, you should contact your lender to discuss your existing arrangements and any alternative options which may be available.
Gas and electricity bills
If you think that you will have problems paying your energy suppliers, you should contact your supplier to discuss your tariff and to arrange an affordable way to make your repayments.
This could be a good time to consider switching suppliers to get a better deal.
Things you can do right now to help protect you and your family financially
If you are already struggling with problem debt, you should seriously consider seeking advice from a qualified debt advisor who can provide a range of Scottish debt help services.
Debt Advisory Services Scotland provides free debt advice to people living in Scotland and offers a comprehensive range of Scottish debt help solutions which include debt repayment plans and Trust Deeds in Scotland.
However, before seeking professional help, there are several things that you can do to help improve your current financial situation.
Check your insurance policies
Check whether you have insurance policies that would cover your mortgage payments or replace some of your income if you are off sick or made redundant.
You should check your insurance policies and talk to your insurer to find out more, particularly if you are worried about being made redundant.
Pull all your facts and figures together
Before you can put a plan into place to get out debt, you need to know where you stand. Make a list of your creditors, the balances that are owed together with a note of the monthly repayments.
Create a budget and reduce your regular outgoings
If you have debt problems and you are worried about cash flow, you will need to work out how much money you have coming in and how much money is going out.
Following a budget will help you identify where you are overspending and where cutbacks can be made, freeing up money that can be used towards reducing your debts.
You may need to cut back on as much as possible to get you through the next few weeks. It’s not going to be easy or much fun, but you’ll be glad you did once it’s all over.
Identify your Priority debts
Before you go any further you should identify your priority debts. These are the debts that if not paid, can have serious consequences and they include your mortgage, rent, council tax, energy bills, hire purchase and any other secured debt.
Talk to your creditors
Once you have completed your budget planner and if you think that you will struggle to pay your bills and creditors, you need to talk to those who you money to before your debts get out of control
ignoring your creditors is the last thing you should do as it won’t make the problem go away, it will only make matters worse.
Reduce your credit card and loan repayments
If your credit rating is healthy, you may qualify for a credit card that has a better interest rate than your current one.
Although transferring your debt to a 0% interest credit card can make your repayments easier, these cards may charge a balance transfer fee and to avoid paying interest in the future, you will have to clear the full balance before the end of the 0% period.
Use your savings
If you have some savings available, even if they are in either a fixed-term or notice account, you should be able to use them. Most banks and building societies are now allowing full access to them with no penalties.
You should check with your bank or building society regarding their availability and any potential withdrawal charges.
Consolidate your debts by re-mortgaging
You could consider re-mortgaging to consolidate your debt which may help you to regain financial control.
To qualify for a debt consolidation mortgage, you would need to have enough equity in your property to cover your new mortgage.
There are advantages and disadvantages of consolidating debt into your mortgage that need to be considered before making your decision.
Although the interest charged on your re-mortgage will be lower than the interest being charged on your credit cards and some secured loans, your home would be at risk if you fail to maintain the repayments and you could end up paying more in interest over the longer period.
For more information on re-mortgages visit:
Don’t be afraid to ask for help
If your situation is serious and If you’ve done all you can to cut down in your budget and you are looking for a way to become debt free, then this may be the time to seek professional help.
Debt Advisory Services Scotland can help you find a solution to suit your circumstances.
The Scottish debt help services that we provide include Trust Deeds in Scotland, and debt repayment plans as listed below:
Debt Management Plan and Debt Arrangement Scheme
Both the debt management plan and the debt arrangement scheme require you to repay your debts in full. Depending on your level of debt and the disposable income available for your creditors this can involve a long repayment term.
Trust Deeds Scotland
A Trust Deed in Scotland may allow you to become debt free earlier. Scotland Trust Deeds provide many of the same benefits as debt repayment plans but with potentially a shorter repayment term (normally 4 years). Once the agreed repayment term is completed and subject to having adhered to the terms and conditions of the Scottish Trust Deed, a substantial amount of your debt can be written off.
Trust Deeds in Scotland are legally binding arrangements where you make reduced monthly payments (based on your affordability) usually for 48 months. The interest on your debt will be frozen, and when you have successfully completed Scottish Trust Deed, the remaining balance of your unsecured debt will be written off.
Trust deeds, which are only available to people who live in Scotland are not suitable for everyone, to find the best Scottish debt help solution for you, contact us today.
Careful consideration should always be taken before you decide on the solution to take when dealing with your debts.